Tuesday, October 6, 2015

The
current ownership model for radio stations in which a few corporations
own a huge number of stations in each market has been documented here
and elsewhere to be a dismal failure.

The
promised cost savings from efficient operations of “clusters” of
stations never materialized, leading owners to cut other costs ... such
as the money spent on personalities and staff ... the very people that
made stations sound great.

Programming
quality decreased because stations that once competed for listeners
were now under the same ownership, and care was taken not to attract
listeners to a station at the expense of a co-owned sister station. The
net result: listeners tuned out and the industry changed radically to
the point where many stations have become background entertainment,
leading advertising revenue to tank.

Few
areas experienced this decline as much as Los Angeles, in which two
companies, IHeart Media and CBS, control a huge percentage of the
listening pie -- 47.4 percent in the most recent Nielsen ratings -- and
even one of the better group owners, Entercom, is running a national
contest on its Los Angeles station, The Sound (100.3 FM).

To
put the last statement into perspective (though I am not meaning to
pick on the company), Entercom is giving away $1000 four times ($4000
total) in a contest available to listeners of Entercom stations
nationwide. In the pre-consolidation days, RKO’s KHJ gave away $1000 a
day, and that was in 1975 and but one example. Even in 1984, KHJ gave
away a car a day for a month. For many stations, such contests -- all
local since companies were limited to owning a total of 14 stations
nationwide, seven AM and seven FM -- this was typical.

No
wonder radio listening, especially among young people, is at an
all-time low. Radio is forcing listeners to discover alternative means
of entertainment since radio itself is in such decline, disarray ... and
denial.

While
all of the major group owners can be considered guilty to some extent,
the absolute worst offender by far has been Cumulus Media. Founded by
Lew Dickey in 1997 when he purchased and combined Citadel Broadcasting
-- itself a poorly-run conglomerate -- and Dial Global, the company soon
became a radio giant, with 460 stations in 90 radio markets along with
programming providers such as Westwood and ABC Radio. It is the
second-largest radio group owner in the country, second only to IHeart
Media.

Too
bad the giant has no clue how radio works. Lew Dickey and his brother
John had no business ever running anything related to radio, and the
proof is seen locally on KABC (790 AM) and KLOS (95.5 FM), two
once-great stations that -- especially in the case of KABC -- were
allowed to wither and die.

And
it wasn’t just in Los Angeles; it was seemingly everywhere. In San
Francisco, the Dickey’s meddling caused the destruction of KGO. In New
York, their “expertise” killed WABC. The story is repeated over and over
in almost every one of their 90 markets, and the situation got so bad
that Wall Street even noticed: the company stock dropped more than 80
percent over the past year, closing at a mere 73 cents October 2,
leaving it with a market cap of just under $171 million.

Compare that to its debt load of $2.5 billion
and net operating income of just $11.8 million, and you can see there
is a problem. The market cap itself -- about the equivalent of a mere
ten major market FMs -- has the company worth far more broken up than
together. The question is: why isn’t the Cumulus Board of Directors
taking notice?

Well
they finally did. Announced last week and effective October 13, Lew
Dickey will step down from his position of President and CEO of Cumulus,
while brother John -- an executive VP in charge of content and
programming has already left the company. Lew will unfortunately stay on
as Vice Chairman.

John’s
replacement was not announced at press time, but my dog Shadow could
put together a better programming team. Lew is being replaced by Mary G.
Berner who came to the company from the magazine side of the media
industry and has no radio experience herself. She has her work cut out
for her, and her lack of radio experience is not helpful: Cumulus
stations have for so long been so badly programmed and/or promoted that
most -- dare I say all -- would be better off in the hands of other,
hopefully small or independent owners.

What should
be done? Cumulus should divest itself of all stations. Staggering debt,
a total company valuation that is worth far less than the station
portfolio and a dearth of programming expertise at the top make my
point. That won’t happen, yet at least. But if real radio programmers
are not brought in soon, there’s a good chance it will have to happen. Just turn off the lights if you are the last one to leave the building. Or buildings ...